United Benefit Advisors Insight and Analysis Blog

The Reality of Health Care Budgeting Shortfalls and the Impact on Employers Now and in the Future

I can’t remember the last time that I went out to my mailbox to check for new mail on a Saturday afternoon but, nonetheless, I was shocked when I heard it announced on the morning news recently that Saturday mail delivery would be ending in order to help the U.S. Postal Service find some relief to its serious budgetary issues. However, my shock was not that the good old “snail mail” service was struggling or even that it needed the $2 billion it estimates it will save annually by ceasing Saturday mail delivery.1 My shock was that this new “savings” would not achieve even 50 percent of the pennies in the couch needing to be found to pay the $5.6 billion annual retiree health care fund that the USPS was unable to pay in 2012, despite federal law that they fund this benefit in advance for future retirees.1 So aside from the “benefits” of a tan and the great calf muscles received from many years of mail delivery, does this mean that those who have devoted their entire careers to a government entity with the expectation of certain other benefits (namely that their health care benefits will be paid as promised upon retirement and until death) just isn’t going to happen? The envelope please...

What will happen to the burgeoning population of retirees in future decades who find not only their retirement underfunded but also their health care? And what will the impact of the difficult decisions that these generations will have to make be on Medicare, Medicaid, long-term care costs and the commercial health care insurance industry that already does a fair amount of subsidization for shortfalls that already exist in these programs now? Read on about the real date-sensitive material enclosed…

As America ages, U.S. employers face an emerging business challenge due to the impacts to both corporate health care costs and employee productivity resulting from the eldercare and caregiving crises. A recent study shows that eldercare costs U.S. businesses more than $33 billion in lost productivity annually through absenteeism, distraction, replacement, reduced hours and more. 2

The business disruption breaks down like this -- 12 percent take leaves of absences, 36 percent miss workdays and 40 percent rearrange their schedule.3 And millions more fall into the category of presenteeism -- physically at work but mentally dealing with distractions that impair productivity. Employees who’ve faced caregiving issues are increasingly concerned about their own long-term care. With the average cost for a skilled nursing facility topping $79,935 per year, skyrocketing care costs are the No. 1 risk to a secure retirement for baby boomers.4 Not only is long-term care more costly than most people realize, but also (contrary to popular belief) health insurance, disability plans, even Medicare and Medicaid, don’t cover many of the care options most people would choose.

So what can employers do today to address these issues and reduce the amount of junk mail invading their employees mental inboxes? There are several solutions:

Health and Wellness Initiatives: Whether your organization already embraces the investment in a truly integrated wellness program that rewards and incentivizes healthy behaviors or you are in the initial stages of investigating the true return on investment (ROI) in such a program, make sure that your wellness program includes mechanisms to help identify, address and provide resources for employees suffering the negative effects of stress -- including being a member of the “sandwich generation.

Core Long-Term Care Benefits with “Buy Up” option: Although there has been a significant exodus of carriers from the long-term care insurance industry of late, there are still a couple of well-established carriers offering “true group” coverage, whereby the employer can purchase a basic group long-term care program to fund for their employees and allow employees to “buy up” to a higher level of benefits at their own cost on a voluntary basis. No matter how long-term care benefits are offered to employees, it is essential that caregiving awareness and education be coupled with the introduction, enrollment and implementation of a successful long-term care plan.

Group Retiree Health Plans: More and more employers are finding that their current provider of medical benefits for their active employees and retirees under age 65 is not interested in insuring their retiree population of those age 65+ in coordination with Medicare. In response to this need, UBA’s Strategic Allies such as The Hartford are offering stand-alone group policies to employers that may be funded by the employer or paid by the retiree to fill the gaps in their Medicare medical and pharmacy benefits. Large employers that are self-funding their medical benefits may especially want to inquire with a UBA Partner advisor about the potential reduction to their claims liability from implementing an insured group retiree health plan.

FMLA Absence Management: There is no doubt that larger employers experiencing a high volume of FMLA-related leaves of absence appreciate the peace of mind and convenience of outsourcing this labor-intensive and very complicated HR responsibility. But convenience aside, there is also a very quantifiable potential cost saving reason for employers to consider investing in a FMLA absence management program. When maternity is excluded, caregiving accounts for 40 percent of all FMLA leaves and those who are on FMLA leave for caregiving are four times as likely to file an LTD claim. LTD claims are typically coupled with high medical costs. And so the circulation continues until the final notice arrives C.O.D.

Advisors representing UBA Partner Firms have access to discounted premiums, fees and administration for all of these solutions and more. Contact your local UBA Partner Firm to discuss these ideas in more detail or visit www.ubabenefits.com to locate a UBA Partner Firm near you.

Employers who make it a priority to deliver a well-intentioned employee benefits package to ensure their employees peace of mind about their futures will find the return on their investment in the form of first-class employees reporting for work every day of the week -- and maybe even on Saturdays!

References:

Washington Post: Mandate Pushed Postal Service into the red for first quarter, February 2013

The MetLife Caregiving Cost Study: Productivity Losses to U.S. Business, June 2006

The MetLife Market Survey of Nursing Home & Home Care Costs, September 2009

Caregiving in the United States, National Alliance for Caregiving and AARP, 2004